Glencore Failed to Disclose Royalty Payments to U.S.-Sanctioned Businessman Dan Gertler

Carmakers and Electronics Manufacturers Struggle to Manage Corruption Risks in Supply Chains, as Recommended by the OECD

Resource Matters estimates that Glencore’s Congolese subsidiaries were required to pay an average of more than USD 200,000 per day in royalties in 2018 to Dan Gertler, a businessman sanctioned for corruption by the United States (1). The Swiss multinational has not disclosed how much it actually paid, despite recent fines imposed on one of its subsidiaries for failing to sufficiently inform shareholders about its financial ties to Gertler.

This finding comes from a report documenting how major companies sourcing cobalt from the Congo are doing far too little to mitigate potential corruption risks linked to Gertler and Glencore in their supply chains. This runs counter to their formal support for the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals.

Companies sourcing from high-risk areas should take steps to ensure their suppliers are not engaged in potentially corrupt activities. In 2018, Glencore delivered around one-third of the world’s cobalt output, a key mineral for rechargeable batteries in electric vehicles and electronic devices.

A long-standing partner of Glencore in the DRC, Gertler has faced extensive criticism over his close ties to former president Joseph Kabila and allegations of corruption in the sale of mining assets. Glencore continued to pay Gertler despite the U.S. sanctions imposed on him in December 2017, and despite an ongoing U.S. investigation into possible violations of anti-corruption laws. In December 2018, a Glencore subsidiary reached a settlement with Canadian authorities after admitting it had failed to adequately disclose contractual and financial ties with Gertler-affiliated entities.

Glencore declined to specify what measures it had taken to ensure royalty payments to Gertler were not used for illicit purposes, referring instead to its general anti-corruption policies. Gertler denies any wrongdoing.

The report, entitled Neither Seen Nor Heard, is launched at the OECD Forum on Responsible Mineral Supply Chains in Paris. With the support of Sciences Po Paris, Resource Matters approached 14 companies (2) it has reason to believe source cobalt directly or indirectly from Glencore in the DRC, asking them to explain what steps they had taken to reduce corruption risks arising from Glencore’s payments to Gertler. None were able to demonstrate they had adequately addressed this issue (3).

“For every USD 100 spent on buying Glencore’s cobalt, more than USD 2 is owed to a company under U.S. sanctions. Companies that want to ensure they are not tied to illicit deals should take a close look at the Glencore–Gertler relationship,” said Elisabeth Caesens of Resource Matters. “As long as they cannot demonstrate they have asked Glencore adequate questions about payments to Dan Gertler, and received satisfactory answers, they cannot guarantee their supply is clean.”

Resource Matters urges major car and electronics manufacturers to identify corruption risks more rigorously and to report on them publicly. It also calls on them to commission an independent audit to verify Glencore’s compliance with their ethical standards. As part of this process, they should require Glencore to provide proof that it has audited payments to Gertler to ensure they were not used for illicit purposes.

“In the face of such obvious risks, vague or unsatisfactory answers are not enough. Major cobalt consumers must take responsibility.”

Notes to editors:

1. The report shows how two of Glencore’s DRC subsidiaries – Mutanda Mining and Kamoto Copper Company (KCC) – owe royalties to Ventora Development Sasu, a Gertler-affiliated company. Glencore’s own data suggest that KCC owes royalties representing 2.5% of net revenue. A conservative estimate of these royalties after tax in 2018 is USD 28.46 million. Mutanda owes royalties amounting to 2.43% of gross revenue, estimated at USD 45.75 million for 2018. This estimate is slightly lower than Glencore’s own projection of roughly EUR 10.5 million per quarter, or about USD 47.45 million. These figures reflect amounts owed, not necessarily paid, as some may have been offset against advance royalty payments. Full methodology is available at www.resourcematters.org.

2. Companies contacted: Apple, BMW, CATL, Daimler AG, Gem, LG Chem, Nevs, PSA, Renault, Samsung SDI, Umicore, Volkswagen.

3. Resource Matters asked all 14 cobalt buyers from Glencore what measures they planned to take to mitigate the corruption risk from Glencore’s ongoing payments to Gertler despite sanctions. 75% did not disclose how they were addressing the issue, while the remaining 25% accepted Glencore’s response that there had been no conviction yet. Given that Glencore was still making payments to a sanctioned inpidual, this approach is inadequate.